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Senate Republicans Threaten Wheeler's Confirmation Over Biofuel

(Bloomberg) -- Five Republican senators have issued a veiled threat against President Donald Trump’s nominee to lead the EPA, suggesting that their votes to confirm Andrew Wheeler hinge on whether he will take steps to help oil refiners forced to blend biofuel into gasoline.

“Without an adequate proposal to meaningfully lower the regulatory burden,” the senators said in a letter to Wheeler, “we will have serious concerns with your nomination.”

Led by Ted Cruz of Texas, the senators laid out a raft of concerns with the Renewable Fuel Standard that mandates biofuel use, a top target for oil refiners in their home states. The other letter signers were Pat Toomey of Pennsylvania, Mike Lee of Utah and John Kennedy and Bill Cassidy of Louisiana.

“As we continue to evaluate your nomination to be administrator, it is important that we have a better understanding of your views and approach to administering the RFS and the agency actions you believe could alleviate costs,” the senators told Wheeler in the letter, which was dated Feb. 11 and obtained by Bloomberg.

Wheeler, who has been leading the EPA on an acting basis since last July, is waiting for a full Senate confirmation vote to be the agency’s administrator. Although the five senators stopped short of an explicit threat to vote against Wheeler, the loss of their votes could tip the balance given the Republicans’ narrow majority and widespread Democratic opposition to his nomination.

The move underscores the political perils surrounding the U.S. biofuel mandate, which pits oil refiners against producers of corn-based ethanol.

Concerns over biofuel policy dominated a January hearing over Wheeler’s nomination, as corn-state senators pressed him to swiftly finalize a regulation allowing year-round sales of higher-ethanol E15 gasoline, and lawmakers from states with significant oil interests pushed back. Senator James Inhofe, a Republican from Oklahoma, bluntly warned Wheeler that “corn is not the only stakeholder in this program,” but “there is growing concern the administration is only listening to one side of the argument.”

The strategy mirrors one successfully employed by corn-state lawmakers in 2017 over another EPA nominee. At the time, Senator Joni Ernst, an Iowa Republican, wouldn’t commit to backing Bill Wehrum to lead the EPA air office that administers the renewable fuel mandate, unless the administration backed off from possible changes to the program.

This time, senators with home-state oil interests have asked Wheeler if the EPA will alter biofuel blending targets as part of a broad upcoming “reset” of the RFS program. They also asked Wheeler to agree that under a recent court ruling, the EPA isn’t required to redistribute waived biofuel quotas to non-exempted refineries. Oil industry leaders have argued against any such reallocation, arguing it would be illegal and would unfairly penalize refineries that are complying with biofuel requirements.

Compliance with annual biofuel quotas is tracked through tradable credits known as Renewable Identification Numbers, or RINs. Refiners have warned about financial hardship whenever RIN prices spike, and Cruz has pushed the EPA to rein in those costs.

Prices for those credits have tumbled under Trump, as the administration held a series of meetings aimed at brokering a biofuel policy deal between oil and agricultural interests. Last fall, Trump ordered the EPA to allow year-round sales of higher blends of ethanol, and as part of that effort, the agency is drafting plans to boost RIN trading transparency.

RINs cost more than 90 cents when Trump was elected in November 2016. A RIN tracking 2019 ethanol consumption targets cost 20.5 cents as of Tuesday, according to data compiled by Bloomberg.